On the 17th of November, heads of states and envoys from Pacific nations met in Papua New Guinea, for the 2018 Asia Pacific Economic Cooperation (APEC) Summit. Instead of providing a diplomatic bridge for the US and China, the summit highlighted strong differences between the two powers.

Indeed, trade disputes between China and the US are not likely to be resolved as Xi Jinping and Mike Pence’s statements leaned toward escalation. Replying to Xi’s warnings about the threat that “protectionism and unilateralism” represent for global growth, the American vice-president inferred that US tariffs could well be doubled on Chinese goods and lashed out at China’s Belt and Road Initiative (BRI).

Depicting the initiative as a “constricting belt or a one-way road”, Pence called on Pacific nations to not compromise on their sovereignty when accepting Chinese loans. Representing the traditional powers of the Pacific, Australia, Japan and the US have grown wary of Chinese overtures to the region and infrastructure plans that could give it primacy in the Pacific. Consequently, the US has joined Australia in the financing of a navy port in Papua New Guinea to prevent China from implanting itself on the strategically placed archipelago.

The APEC summit happened the same day in which Ibrahim Mohamed Solih, the new president elect of the Maldives, took office. With his “India first” policy, the new president is likely to turn the page on his predecessor’s leaning on China, which has left the country with a $1.5 billion debt, equivalent to more than a quarter of its GDP. The nation on the Indian Ocean is a new addition to the growing list of countries reviewing and halting Chinese-financed infrastructure projects.

In 2018, 38 BRI projects have been suspended or altogether cancelled in countries like Malaysia, Thailand, Bangladesh and Indonesia. Offered by Chinese companies at commercial rates, BRI loans have dangerously impacted the public finances of many countries, such as Pakistan which is in talks to get $12 billion in concessional loans from the IMF. Djibouti’s public debt rose from 50% GDP in 2014 to 98% in 2017 as a result of BRI and similar financial predicaments have forced Sri Lanka to lease its southern port of Hambantota to Chinese companies for 99 years in a bid to convert 6$ billion of loans into equity.

The Chinese government knows full well the concerns of its BRI partners and Xi reassured the latter on Saturday by highlighting BRI’s inclusive nature and rejecting claims that the initiative was a “trap”. During the October IMF and WB Bali Summit, his vice-finance minister acknowledged debt sustainability issues linked to BRI and promised to reinforce macroeconomic supervision before offering loans to countries. He also declared that Chinese companies would move away from commercial loans and start offering more foreign direct investments, private-public partnerships and equity investments, whose interest rates are more viable for beneficiaries.

VP Pence’s APEC statements show a growing willingness on America’s part to counter BRI and offer alternatives to countries needing infrastructure investments. Considering trade tariffs on China, talks of a free trade agreement with Taiwan in addition to sanctions waivers on Iranian oil for the island, as well as sanctions waivers on the Indian-financed Chabahar port south of Iran, it seems that the Trump Administration is doubling down on its efforts to oppose China’s growing global presence by forging strong relations with China’s rivals.


Reuters, 17 November 2018, “US-China discord dominates APEC summit in Papua New Guina”

Reuters, 16 November 2018, “India’s Modi embraces Maldives as new leader takes office, China out of favour”

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